Manufacture Hawk Has Two Options for Installing Legally Required Safety

question 105

Essay

Manufacture Hawk has two options for installing legally required safety equipment.Option Ex has an initial cost of $25,000 and annual operating costs over three years of $5000, $5250, $5600.Option WYE has an initial cost of $40,000 and annual operating costs of $4000, $4200, $4450, $4750 and $5100.Whether Manufacture Hawk chooses Ex or Wye, the equipment is always needed and must be replaced at the end of its useful life.Which choice is least expensive over the long run? Use a discount rate of 9%.

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Definitions:

Family Home

A primary residence where a family lives and conducts their daily activities.

Security Interest

A legal claim or lien on collateral that has been pledged, usually to secure repayment of a loan.

Collateral

Assets pledged by a borrower to secure a loan or credit, which can be seized by the lender if the borrower fails to repay according to the agreed terms.

Enforceable Security Interest

A legal claim or lien on collateral that secures the fulfillment of a debt or obligation, which can be enforced in court.